European Shares Jump After Spanish Bond Sale

Published April 17, 2012

Reuters

European stock markets edged higher on Tuesday, with investors attracted by prices cheapened by a steep month-long sell-off, although concerns about Spain's finances kept the overall mood cautious and volumes low.

By 0743 GMT, the FTSEurofirst 300 index was up 0.4 percent at 1,036.32 points, extending gains into a second day.

The Euro STOXX 50 index of euro zone blue chips added 0.8 percent to 2,319.68 points, bouncing from technical support of 2,300 but still down some 11 percent since mid-March.

The government's 10-year sovereign bond yields climbed back above 6 percent for the first time this year on Monday and they rose to 6.1 percent in early trade as investors fretted that a recession may scupper deficit targets and eventually necessitate an international bailout.

But on Tuesday a pledge of $60 billion from Japan in loans to the International Monetary Fund went some way to reassure investors that if a bailout is needed, money will be found.

"Spain can be handled to some degree," Gerhard Schwarz, head of equity strategy at Baader Bank, said.

Investors will also scrutinise the German ZEW sentiment indicator at 0900 GMT for signs of any feed through from the troubles in Spain and other Southern European countries. The economic sentiment index is seen edging down to 20.0 in April from March's 1-1/2 year high of 22.3.

"Our risk barometer remains at elevated levels and is unlikely to ease anytime soon, suggesting that a cautious tone towards risk assets remains warranted," strategists at Credit Agricole IB said in a note.

"The recent resurgence of risk aversion following the mixed set of data from China and the U.S., as well as the renewed tensions on the peripherals' bond markets might have altered the confidence of German financial markets professionals ... Risks to our forecasts appear skewed to the downside based on past (over)reaction of the ZEW to negative headlines."